Healthy Accomplishments

ntil the mid-1990s, the Veterans Health Administration, which runs the largest health care delivery system in the nation, seemed impervious to the complaints of its customers. For years, veterans had griped about substandard service. It wasn't uncommon for a veteran to arrive at a VA hospital in the morning after traveling hundreds of miles and wait until day's end to see a doctor--usually one the veteran never had seen before. Patients sometimes were lost on hospital grounds or died after unexplained lapses in care. Hospital employees complained their facilities were disorganized; managers felt hog-tied by micromanaging headquarters officials.

All those problems aren't gone, but VHA has taken some impressive steps toward fixing them.

Kenneth Kizer, Veterans Affairs under secretary for health, took over VHA in 1994. A physician and former head of California's Health Services Department, Kizer immediately began preparing for changes. Within a year, he began the largest reorganization of VA hospitals since Congress created the VA medical system in 1946. VHA organized its 173 hospitals and more than 500 other health care facilities into 22 veterans integrated service networks (VISNs). VHA shifted its focus from costly inpatient hospital care to outpatient services offered in more than 100 new VA clinics and by the private sector.

The fast-paced, sweeping changes brought accolades from Congress, many veterans organizations and even from managers who had built long careers within VHA. The VISN system gives network directors unprecedented freedom to allocate resources. In exchange for that discretion, directors sign tough performance agreements linked to VHA's strategic goals. Most observers remain at least cautiously supportive as restructuring proceeds.

Dire Need for Change

The strength of support for reorganizing VHA is due in large part to the dire need for change. Until recently, VHA had not kept up with
the changing demographics of American
veterans. In 1990, 5 percent of veterans were 75 or older, but by 2010, almost a quarter of them will be in their mid-70s or older. During the same period, the proportion of veterans under 45 will fall from nearly a third to just 16 percent. Veterans also are moving in significant numbers from the once veteran-heavy Northeast and Midwest to the South and West.

Today's VHA patients also are less likely to be wounded soldiers than low-income veterans with problems unrelated to their military service--just 12 percent of VHA patients were treated for service-connected disabilities in 1995, GAO found. Veterans now need outpatient or nursing home care more often than hospital stays. Between 1993 and 1997, VA admissions
for inpatient care decreased about 23 percent.

These changes left VHA stuck with large staffs in big hospitals, when those employees were needed elsewhere. Kizer's response was a resource redistribution plan called the Veteran's Equitable Resource Allocation (VERA) system. The system distributes VHA's operating funds among hospitals based on the number of veterans served. "It's essentially taking the money and, rather than putting it where the buildings are, putting it where the
veterans are," says Gregg Pane, VHA policy and planning chief.

In its first year, the program caused nine VISNs to lose some 1998 funding. The remaining 13 gained money. For example, VISN 3, in the Bronx, N.Y., lost $124 million, while funding for VISN 18, in Phoenix, jumped by nearly $60 million. VERA has won high praise in some quarters. GAO says VERA "shows promise for correcting long-standing regional funding imbalances." Clinton administration officials call it extremely important in VA's effort to operate within a constrained budget--1997's balanced budget agreement fixed VA health care funding at $17 billion a year through 2002. Politicians whose districts have lost VHA funds, however, are less enthusiastic.

Over the next five years, VHA wants to reduce per-patient costs by 30 percent while serving 20 percent more veterans. The agency plans to add 72 new clinics, bringing the total to 339. These clinics provide primary care--a system in which generalist physicians see patients initially and coordinate any necessary specialty care--and frequently use non-VHA providers. VHA hoped to increase the number of non-physician primary care providers by 200 percent by the end of 1998. Veterans groups and other observers complain the staffing changes have shifted too much responsibility and status to physician's assistants and nurse practitioners.

Willing to Learn

VHA is ahead of many agencies in managing for results. A combination of employee and customer input and careful reading of changes in the veteran population produced the VISNs and VERA. The reorganization and ongoing effort to redistribute resources give VHA a far better chance of improving results for its patients within a fixed health care budget.

VHA has room to improve in financial, information technology and capital management. The agency has problems collecting payments from third-party insurers--a potentially deadly failing, given that VHA is counting on such reimbursements to make up 10 percent of its budget by 2002.

VHA's effort to put in place a computerized decision support system to give managers information on business operations has been hobbled by missed deadlines and questions about data accuracy. Capital asset management suffers from inattention to maintenance and inability to close unneeded facilities due to congressional objections.

No Time for Maintenance

VHA has a sophisticated capital planning process that begins with individual facilities identifying their capital needs, progresses through the departmentwide Capital Investment Panel and ends with funding requests to OMB and Congress. Politics and chronic underfunding hamper the process. It hasn't cured the agency's or legislators' reluctance to close unneeded facilities, Clinton administration officials say. "They have processes in place, but our experience at this point is that their capital planning process is not yet locked into the operational planning," one administration official says.

Capitol Hill is a stumbling block. For example, in fiscal 1998, Congress funded six VHA projects, including hospital renovations and additions, that the Clinton administration didn't request. In 1997, Congress refused to fund two projects for which VA had requested $60 million. "That's what we call the big P," says VHA director of program planning and coordination services Jerry Frostman, referring to political modifications of the agency's capital plans. "It sets up a second kind of track for projects to be appropriated, but I don't think it fully undermines [capital planning]."

Other capital management difficulties stem from deficient maintenance funding and planning. "At the facility level, the list of items in our database to be fixed is somewhere around 15,000 to 20,000, and we can do about one-tenth of everything we have on our lists," explains William W. Graham, director of VHA's engineering management and field support office. "We're just sort of caught. If it's not broke we're just not gonna fix it."

Dramatic Challenges

The changing nature of VHA health care brings with it dramatic human resources challenges. "We need to create a mobile, agile, continuously employable workforce that operates under the goals of continuous cooperation," says Randy Petzel, the director of VISN 13, which encompasses North Dakota, South Dakota and Minnesota. "We have to change the whole culture of the way we work."

Managers are encountering difficulties hiring the right people, maintaining the appropriate mix of skills among employees and handling poor performers. Robert Roswell, director of VISN 8, headquartered in Bay Pines, Fla., says his network's commitment to using non-physician caregivers often is frustrated by hiring restrictions. Headquarters officials blame salary limits and location for some of the problems. The private sector offers higher
entry-level pay for jobs such as physician assistant and occupational therapy assistant now in high demand within VHA. Remote VHA facilities have trouble recruiting and retaining staff.

VHA is adopting new recruitment and retention tools such as tuition support for employee training, school loan repayment and scholarship programs. VISN 8's "Grow-Our-Own" program trains registered nurses to become nurse practitioners through an Internet-based, distance learning pilot program with St. Louis University in Missouri.

Dealing with poor performance is more complicated. Survey data indicate that VHA doesn't shirk from strong action. In 1997, 1,161 of the agency's 185,000 employees were fired for cause, while 1,358 were suspended. Nevertheless, managers and employees in the field complain of disciplinary difficulties.

An April 1998 General Accounting Office report found VHA might not be dealing with poor performance of managers. The report said none of 477 senior managers--medical center directors, associate or assistant directors and chiefs of staff--received a performance appraisal of less than "fully successful" from 1994 through 1996. But two-thirds of VISN directors told GAO auditors that they had poor or marginal performers on their staffs. The directors said they did not identify poor or marginal performance in the appraisals because they would have had to take formal action to remedy the problems. Spending vs. Collecting

VHA and the Clinton administration have pinned high hopes on the agency's new decision support system (DSS). It's supposed to provide managers with business information to ease financial decision-making. The system will supply data on patterns of patient care and health outcomes. That data then can be used to analyze resource utilization and the cost of providing services.

Administration officials predict DSS will bring dramatic improvements in financial and performance reporting. "They're really working diligently to be able to actually cost out what a procedure like an X-ray, blood pressure or other types of treatment costs," says William Warfield, deputy director of government relations for the Vietnam Veterans of America. GAO, however, has raised questions about the accuracy of DSS data and the system's installation, which was delayed several months in 1998.

VHA has created new contracting policies to take advantage of its size as a drug and medical device buyer. But unions and veterans groups suggest VHA is not adequately monitoring contracts for consolidated community nursing homes. A series of 1998 VA inspector general reports drew attention to other financial management problems such as internal control weaknesses with real property and equipment.

One report found more than half of the VISNs failed to meet their goals for collecting reimbursements from third-party insurers in the Medical Care Cost Recovery program (MCCR). The 1997 Balanced Budget Act allows VA to retain MCCR funds to supplement annual appropriations. Between 1987 and 1995, annual MCCR collections increased from $23.9 million to $580.7 million. But then they began falling off, dropping to $557.2 million in 1996 and $519.7 million in 1997.

Trying Technology

The size and complexity of VHA information technology systems pose problems for managers. "Because of the diverse nature of these systems, it is easy to misinterpret data," says Eric K. Undesser, clinical information officer for VISN 16 and chief of the neurology service at the VA Medical Center in Jackson, Miss. "Due to the complexity of our corporate systems, the knowledge and skill of the analyst are of paramount importance in interpreting the data."

VHA headquarters officials contend that managers use and benefit from the comprehensive IT network. For example, an automated bridge between the VHA and the Veterans Benefits Administration helps employees at both agencies decide who is eligible for what type of care, says Michael Reynolds, a VHA policy planner.

Undesser contends that the underlying problem in most management systems is data quality. "VHA has collected vast quantities of data for many years," he says. "Much of this data is input by overworked ward and clinic clerks who have little, if any, idea what the information is used for, and minimal feedback as to the accuracy of the information input into the systems."

Undesser also says VHA needs more systematic training for IT users. AFGE's Cox agrees. "There are not a lot of resources, and it's pretty difficult to free people up for training," he says.

VHA is on track to have all its mission-critical computer systems inoculated against Year 2000 glitches. VA officials say. Rep. Stephen Horn, R-Calif., chairman of the House Government Reform and Oversight government management, information and technology subcommittee, gave the VA a B- for its Y2K efforts for the third quarter of 1998.

Powerful VISN

When Congress graded agency performance plans in April 1998, only the Transportation Department's rated more highly than the VA's. VHA's portion of the plan gave the VA's plan an extra ratings boost. "They do have a strategic sense of direction. If they should be measuring anything else I don't know what it would be," says Steven Backhus, GAO's director of veterans affairs and military health care issues.

VHA has set key strategic targets for 2002, known as "10 for 2002." Examples include increasing to 100 percent the number of employees able to describe how their work helps meet the VHA mission and increasing to 90 percent the proportion of patients rating VHA health care at least equivalent to what they would receive elsewhere.

Kizer ensures these goals are met by striking a performance contract with each VISN director. "The agreements are very powerful tools that are consistent with strategic planning and giving each VISN autonomy," administration officials say. "This is a communications tool and a contractual tool for the fundamental vision of the agency."

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